PetroSA move fires up suspicions
Parastatal asks CEF to place it under business rescue
THE board of troubled state-owned oil company PetroSA has asked its holding company, the Central Energy Fund (CEF), to place it under business rescue, raising questions over its status as a going concern.
PetroSA has suffered huge financial losses over the past three years, but it is unprecedented for a state-owned entity to ask to be placed under business rescue.
PetroSA has a projected loss of R2.2-billion for the year to March 2017. This follows its record R14.6-billion net operating loss in the 2014-15 financial year.
Despite these losses, PetroSA paid out large performance bonuses to its executives at the end of 2016, linked to the Ikhwezi project, responsible for a near R15-billion impairment in financial 2014-15.
State-owned companies, no matter how distressed, have avoided business rescue due to the loss of control over operations the move entails. Instead they have relied on Treasury loan guarantees to secure their going-concern status.
Business Day understands that the PetroSA board approached the CEF in January with a proposal that it be placed under administration.
A senior official confirmed the request and that PetroSA was in severe financial distress. However, the official said that the CEF had refused the board’s request. As business rescue would shield directors from claims of reckless trading, it had been viewed by some in the CEF as a convenient escape from liability.
Both PetroSA and the CEF declined to comment on the business rescue move. “At an appropriate time, we shall make our position known,” spokesman Jacky Mashapu said.
Leadership and management instability have plagued all the CEF subsidiaries for years. The PetroSA board recently clashed with the new CEF chairman, Luvo Makasi, who had written to them to resign with immediate effect. Those who did not want to resign had to give reasons in writing why they should stay and make representations at the next annual meeting on May 10.
Business Day has been reliably informed that two board members have since tendered their resignations.
The CEF has expressed concern about the strategic direction, financial standing and management of the oil firm.
Makasi has also accused the current board of underestimating PetroSA’s losses in quarterly reports over the year. — TMG